Criminal probe into Pilot Flying J's fuel rebate program tops trucking news in 2013

By Clarissa Hawes, staff writer

On the list of top trucking stories of 2013, the criminal investigation into Pilot Flying J’s fuel rebate program and the ensuing lawsuits were blockbusters.

The Federal Bureau of Investigation and the Internal Revenue Service raided Pilot’s corporate headquarters on April 15, 2013, and soon federal investigators publicly announced a criminal investigation into Pilot Flying J’s fuel rebate program stemming back to 2005.

To date, seven former Pilot sales employees have pleaded guilty to their roles to defraud trucking companies out of rebates they were owed as part of agreements to purchase a certain volume of fuel from Pilot each month.

Pilot CEO James “Jimmy” Haslam III, also owner of the Cleveland Browns, denied any involvement in the alleged fuel rebate scam.

Stories of the numerous lawsuits – originally as many as 30 – dominated the trucking news during much of the year. Some of those lawsuits were combined in a class action effort; others decided to pursue their own actions.

Class action settlement
In late November 2013, U.S. District Court Judge James M. Moody approved a class action settlement in which Pilot will pay more than $56.5 million to trucking companies that had a rebate or discount program with Pilot from Jan. 1, 2005, to July 15, 2013. Pilot will pay another $9.75 million in interest, which is 6 percent.

More than $18.6 million will go toward attorneys’ fees and to pay a court-approved accounting firm, Horne LLP, to review Pilot’s internal audit department’s procedures and protocols used to “calculate settlement payments, and to conduct a statistical sampling of accounts to verify the accuracy of internal audit’s conclusions.”

“The settlement is fair in light of the substantial risk and burden on the plaintiffs had they been forced to litigate the case,” said Pilot in a statement about the court-approved settlement.

At the center of that settlement is National Trucking Financial Reclamation Services of Little Rock, Ark. Lane Kidd, president of the Arkansas Trucking Association, formed and incorporated National Trucking on April 22, 2013 – only two days before filing the suit and just days after the federal investigation into Pilot’s fuel rebate program practices was announced.

Kidd has not disclosed the names of the carriers he represents, but said they are Arkansas-based trucking companies and are member companies of the Arkansas Trucking Association.

In a statement to Land Line about the settlement, Kidd said the companies he is representing “wish to remain anonymous.”

“I do not have the final audited numbers, but collectively they were owed several thousands of dollars,” Kidd said.

Kidd told Land Line in early November that “he has not received and will not receive a dime” from his involvement in the settlement he helped orchestrate.

Sixteen active cases opt out of class action, still pending
As of press time in January, there were still 16 active cases pending against the truck stop chain. Those cases opted out of the class action.

One of them is a lawsuit filed in federal court in Alabama that is moving forward, but has had some hiccups. In mid-January, a federal judge dismissed several key counts in the lawsuit filed on behalf of Wright Transportation of Mobile, Ala., over Pilot’s alleged fuel rebate scam.

However, the judge wrote in his ruling that Wright may amend and refile its pleadings in five of the counts alleged in its lawsuit.

In September 2013, Wright Transportation filed a class action lawsuit against Pilot, as well as James A. Haslam III, John Freeman, Brian Mosher and Mark Hazelwood over an alleged fuel rebate scam, which potentially bilked trucking companies out of millions of dollars.

In its complaint, Wright Transportation stated in the suit that it had a fuel rebate contract with Pilot Flying J from approximately 2005 until the time the lawsuit was filed.

U.S. District Court Judge William H. Steele did not dismiss Wright Transportation’s charges of breach of contract against Pilot and the defendants, stating that “it is difficult to imagine what could be missing from them.”

“The parties agreed to a set discount to be honored by rebate, and Pilot Flying J breached the agreement by rebating less than the full, agreed discount,” Steele wrote in his ruling. “The court can detect no deficiency in these allegations and the defendants’ cursory argument is unilluminating.”

Western Express reaches separate and undisclosed settlement
One case recently settled for an undisclosed amount was Western Express Inc. of Nashville, Tenn., which was one of the companies that opted to pursue its own legal action against Pilot after news of the criminal investigation broke. Western Express was named as one of the companies allegedly targeted by Pilot in the Federal Bureau of Investigation’s 120-page affidavit.

In its lawsuit filed in September 2013, Western Express claimed it was defrauded out of $2.5 million, which resulted in losses of more than $75 million.

“Pilot has been a great partner for many years,” Paul Wieck, president of Western Express, told Land Line in January. “They had some issues arise in their business that they have corrected and made right. We look forward to the partnership continuing for many years.” LL